Daktronics(DAKT) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and related notes, along with management's discussion and analysis of financial condition and results of operations Item 1. FINANCIAL STATEMENTS (Unaudited) This section presents the unaudited condensed consolidated financial statements of Daktronics, Inc. and its subsidiaries for the quarter ended August 2, 2025, compared to prior periods. It includes the balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | ASSETS | August 2, 2025 | April 26, 2025 | | :-------------------------- | :------------- | :------------- | | Cash and cash equivalents | $136,856 | $127,507 | | Accounts receivable, net | $124,254 | $92,762 | | Inventories | $109,455 | $105,839 | | Total current assets | $429,384 | $381,451 | | TOTAL ASSETS | $545,591 | $502,892 | | LIABILITIES AND EQUITY | | | | Accounts payable | $64,950 | $46,669 | | Contract liabilities | $83,408 | $69,050 | | Total current liabilities | $207,551 | $172,005 | | Total long-term liabilities | $58,289 | $58,956 | | TOTAL STOCKHOLDERS' EQUITY | $279,751 | $271,931 | | TOTAL LIABILITIES AND EQUITY| $545,591 | $502,892 | - Total assets increased by $42.7 million from April 26, 2025, to August 2, 2025, primarily driven by increases in cash and cash equivalents, accounts receivable, and inventories[8] - Total current liabilities increased by $35.5 million, mainly due to higher accounts payable and contract liabilities[11] - Total stockholders' equity increased by $7.8 million, reflecting net income and other equity changes[11] Condensed Consolidated Statements of Operations This section reports the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | Change (YoY) | | :-------------------------- | :-------------------------------- | :------------------------------- | :----------- | | Net sales | $218,972 | $226,088 | (3.1)% | | Cost of sales | $153,900 | $166,390 | (7.5)% | | Gross profit | $65,072 | $59,698 | 9.0% | | Operating expenses | $41,800 | $36,982 | 13.0% | | Operating income | $23,272 | $22,716 | 2.4% | | Income before income taxes | $22,223 | $220 | 10001.4% | | Net income (loss) | $16,470 | $(4,946) | (433.0)% | | Basic EPS | $0.34 | $(0.11) | (409.1)% | | Diluted EPS | $0.33 | $(0.11) | (400.0)% | - Net income significantly improved to $16.5 million for the three months ended August 2, 2025, compared to a net loss of ($4.9 million) in the prior year, largely due to the absence of a change in fair value of convertible note expense[13][145] - Gross profit increased by 9.0% year-over-year, reaching $65.1 million, while net sales decreased by 3.1%[13][134] Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents net income or loss alongside other comprehensive income items, reflecting total changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :-------------------------- | :-------------------------------- | :------------------------------- | | Net income (loss) | $16,470 | $(4,946) | | Cumulative translation adjustments | $279 | $128 | | Total other comprehensive income, net of tax | $279 | $128 | | Comprehensive income (loss) | $16,749 | $(4,818) | - Comprehensive income improved significantly to $16.7 million for the three months ended August 2, 2025, from a comprehensive loss of ($4.8 million) in the prior year[15] Condensed Consolidated Statements of Stockholders' Equity This section details changes in equity accounts, including net income, share repurchases, and other comprehensive income Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Item | Balance as of April 26, 2025 | Net Income | Cumulative Translation Adjustments | Share-based Compensation | Exercise of Stock Options | Employee Savings Plan Activity | Treasury Stock Purchased | Balance as of August 2, 2025 | | :-------------------------- | :--------------------------- | :--------- | :--------------------------------- | :----------------------- | :------------------------ | :----------------------------- | :----------------------- | :--------------------------- | | Additional Paid-In Capital | $189,940 | — | — | $947 | $128 | $648 | — | $191,663 | | Retained Earnings | $127,910 | $16,470 | — | — | — | — | — | $144,380 | | Treasury Stock (Amount) | $(39,759) | — | — | — | — | — | $(10,652) | $(50,411) | | Accumulated Other Comprehensive Loss | $(6,160) | — | $279 | — | — | — | — | $(5,881) | | Total | $271,931 | $16,470 | $279 | $947 | $128 | $648 | $(10,652) | $279,751 | - Stockholders' equity increased from $271.9 million as of April 26, 2025, to $279.8 million as of August 2, 2025, primarily driven by net income of $16.5 million, partially offset by treasury stock repurchases of $10.7 million[18] Condensed Consolidated Statements of Cash Flows This section categorizes cash inflows and outflows into operating, investing, and financing activities for the reporting period Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :-------------------------- | :-------------------------------- | :------------------------------- | | Net cash provided by operating activities | $26,097 | $19,481 | | Net cash used in investing activities | $(5,620) | $(5,969) | | Net cash (used in) provided by financing activities | $(11,128) | $2,062 | | Net increase in cash, cash equivalents and restricted cash | $9,349 | $15,510 | | Cash, cash equivalents and restricted cash, End of period | $136,856 | $97,188 | - Net cash provided by operating activities increased to $26.1 million from $19.5 million year-over-year, driven by improved business profitability[24][156] - Net cash used in financing activities was ($11.1 million), a significant change from the $2.1 million provided in the prior year, primarily due to $10.7 million in common share repurchases[24][158] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Basis of Presentation This note outlines the basis for preparing the unaudited condensed consolidated financial statements, confirming adherence to GAAP and SEC rules for interim reporting. It highlights the company's business as a leader in electronic display systems and details the fiscal year structure, noting the current quarter included 14 weeks compared to 13 in the prior year. It also reconciles cash and cash equivalents and discusses recent and upcoming accounting pronouncements - The three months ended August 2, 2025, included 14 weeks of operations, compared to 13 weeks for the three months ended July 27, 2024, impacting comparability[29] Cash, Cash Equivalents, and Restricted Cash (in thousands) | Item | August 2, 2025 | July 27, 2024 | April 26, 2025 | | :---------------------------------------------------------------------- | :------------- | :------------ | :------------- | | Cash and cash equivalents | $136,856 | $96,809 | $127,507 | | Restricted cash | — | $379 | — | | Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | $136,856 | $97,188 | $127,507 | - The Company adopted ASU 2023-07, Segment Reporting, for annual periods beginning in fiscal year ending April 26, 2025, with no changes to reportable segments. It will adopt for interim periods beginning in fiscal year ending May 2, 2026[34] - The Company is evaluating the impact of ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures), effective for fiscal years 2026 and 2027 respectively, and ASU 2025-05 (Credit Losses for Accounts Receivable and Contract Assets), effective for fiscal year 2027[35][36][37] Note 2. Investments in Affiliates This note details the Company's equity method investments in X Display Company Technology Limited (XDC) and Miortech Holding B.V. (Etulipa). Despite majority ownership in Miortech, neither entity is consolidated as Daktronics is not deemed the primary beneficiary. The note also covers related party transactions for R&D services and funding provided through Affiliate Notes, including provisions for uncollectible notes - Daktronics holds 55.9% ownership in Miortech and 16.4% in XDC, but does not consolidate them, accounting for them under the equity method as it is not the primary beneficiary[39] - The Company's share of affiliate losses was $805 thousand for the three months ended August 2, 2025, compared to $931 thousand in the prior year[40] - Total face value of outstanding Affiliate Notes increased to $21.7 million as of August 2, 2025, from $19.8 million as of April 26, 2025[41] - An additional provision of $795 thousand was recorded for an uncollectible affiliate note during the three months ended August 2, 2025, following a $15.5 million provision in fiscal 2025[42] Note 3. Earnings Per Share This note provides the calculation of basic and diluted earnings per share (EPS). For the three months ended August 2, 2025, basic EPS was $0.34 and diluted EPS was $0.33, a significant improvement from a loss per share in the prior year, which was impacted by the convertible note's fair value change Earnings Per Share Reconciliation (in thousands, except per share data) | Metric | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :---------------------------------------------- | :-------------------------------- | :------------------------------- | | Net income (loss) | $16,470 | $(4,946) | | Weighted average shares outstanding (Basic) | 48,902 | 46,311 | | Basic earnings per share | $0.34 | $(0.11) | | Weighted average common shares outstanding (Diluted) | 49,736 | 46,311 | | Diluted earnings per share | $0.33 | $(0.11) | - Diluted EPS improved from ($0.11) in the prior year to $0.33, primarily due to the current period's net income and the prior year's net loss being influenced by a $21.6 million change in the fair value of the Convertible Note[44][45] Note 4. Revenue Recognition This note details the disaggregation of revenue by segment and performance obligation, as well as changes in contract balances. Revenue is categorized by unique/limited configuration and service, and by timing of recognition (point in time vs. over time). Contract assets and liabilities are summarized, with contract liabilities showing a notable increase Disaggregated Revenue by Segment and Performance Obligation (Three Months Ended August 2, 2025, in thousands) | Type of Performance Obligation | Commercial | Live Events | High School Park and Recreation | Transportation | International | Total | | :----------------------------- | :--------- | :---------- | :------------------------------ | :------------- | :------------ | :---- | | Unique configuration | $8,914 | $63,263 | $14,897 | $9,498 | $6,608 | $103,180 | | Limited configuration | $31,242 | $9,394 | $41,911 | $4,390 | $8,058 | $94,995 | | Service and other | $6,011 | $7,143 | $2,539 | $2,687 | $2,417 | $20,798 | | Total | $46,167 | $79,800 | $59,347 | $16,575 | $17,083 | $218,972 | Disaggregated Revenue by Timing of Recognition (Three Months Ended August 2, 2025, in thousands) | Timing of Revenue Recognition | Commercial | Live Events | High School Park and Recreation | Transportation | International | Total | | :---------------------------- | :--------- | :---------- | :------------------------------ | :------------- | :------------ | :---- | | Goods/services transferred at a point in time | $34,069 | $11,680 | $41,794 | $6,141 | $8,903 | $102,588 | | Goods/services transferred over time | $12,098 | $68,120 | $17,553 | $10,434 | $8,180 | $116,385 | | Total | $46,167 | $79,800 | $59,347 | $16,575 | $17,083 | $218,972 | Changes in Contract Balances (in thousands) | Item | August 2, 2025 | April 26, 2025 | Dollar Change | Percent Change | | :---------------------------- | :------------- | :------------- | :------------ | :------------- | | Contract assets | $41,879 | $41,169 | $710 | 1.7% | | Contract liabilities - current | $83,408 | $69,050 | $14,358 | 20.8% | | Contract liabilities - noncurrent | $18,497 | $18,421 | $76 | 0.4% | - Contract liabilities (current) increased by 20.8% ($14.4 million) from April 26, 2025, to August 2, 2025, primarily due to timing of billing schedules and revenue recognition, influenced by seasonal sports markets[51] - As of August 2, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $426.7 million, with $360.3 million for product agreements and $66.4 million for service agreements. Approximately $369.4 million is expected to be recognized within the next 12 months[56] Note 5. Segment Reporting This note provides selected financial information for the Company's five reportable segments: Commercial, Live Events, High School Park and Recreation, Transportation, and International. It details net sales, cost of sales, and gross profit for each segment, highlighting changes year-over-year. It also breaks down net sales and property and equipment by geographic area Net Sales by Segment (in thousands) | Segment | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | Change (YoY) | | :---------------------------- | :-------------------------------- | :------------------------------- | :----------- | | Commercial | $46,167 | $34,199 | 35.0% | | Live Events | $79,800 | $108,608 | (26.5)% | | High School Park and Recreation | $59,347 | $48,006 | 23.6% | | Transportation | $16,575 | $22,490 | (26.3)% | | International | $17,083 | $12,785 | 33.6% | | Total consolidated net sales | $218,972 | $226,088 | (3.1)% | Gross Profit by Segment (in thousands) | Segment | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | Change (YoY) | | :---------------------------- | :-------------------------------- | :------------------------------- | :----------- | | Commercial | $13,650 | $7,595 | 79.7% | | Live Events | $20,186 | $26,028 | (22.4)% | | High School Park and Recreation | $21,941 | $17,316 | 26.7% | | Transportation | $5,156 | $7,749 | (33.5)% | | International | $4,139 | $1,010 | 309.8% | | Total consolidated gross profit | $65,072 | $59,698 | 9.0% | - International segment gross profit saw a substantial increase of 309.8% year-over-year, driven by higher sales volume[60][155] Net Sales by Geographic Area (in thousands) | Geographic Area | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :---------------- | :-------------------------------- | :------------------------------- | | United States | $196,588 | $207,219 | | Outside United States | $22,384 | $18,869 | Note 6. Goodwill This note summarizes changes in goodwill for the Commercial and Transportation segments. Goodwill is evaluated annually for impairment, with the most recent assessment as of October 27, 2024, concluding no impairment Goodwill Carrying Amount (in thousands) | Segment | Balance as of April 26, 2025 | Foreign Currency Translation | Balance as of August 2, 2025 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Commercial | $3,159 | $4 | $3,163 | | Transportation | $29 | $1 | $30 | | Total | $3,188 | $5 | $3,193 | - Total goodwill increased slightly by $5 thousand due to foreign currency translation, reaching $3.2 million as of August 2, 2025[63] Note 7. Financing Agreements This note details the Company's long-term debt, primarily consisting of a $75,000 senior credit facility comprising an ABL and a Delayed Draw Loan. It outlines the terms, interest rates, and recent amendments to the Credit Agreement, including changes related to Letters of Credit and repayment obligations. The Convertible Note was fully settled in fiscal 2025 Long-Term Debt Components (in thousands) | Item | August 2, 2025 | April 26, 2025 | | :------------------------ | :------------- | :------------- | | Mortgage | $11,875 | $12,375 | | Long-term debt, gross | $11,875 | $12,375 | | Debt issuance costs, net | $(294) | $(388) | | Current portion | $(1,500) | $(1,500) | | Long-term debt, net | $10,081 | $10,487 | - The Company has a $60.0 million ABL facility and a $15.0 million Delayed Draw Loan, both secured by company assets. As of August 2, 2025, there were no borrowings outstanding on the ABL, with $41.5 million borrowing capacity, and an outstanding principal balance of $11.9 million on the Delayed Draw Loan[69][71][74] - The Convertible Note was fully settled in fiscal 2025 through forced conversions, resulting in no outstanding balance as of August 2, 2025[77] Future Maturities of Long-Term Debt (in thousands) | Fiscal years ending | Amount | | :------------------ | :----- | | Remainder of 2026 | $1,000 | | 2027 | $10,875 | | Total debt | $11,875 | Note 8. Commitments and Contingencies This note addresses the Company's involvement in legal proceedings and claims, stating that no material loss is currently anticipated. It also summarizes changes in warranty obligations and details performance guarantees such as standby letters of credit, bank guarantees, and surety bonds - Management believes the resolution of current legal proceedings will not have a material impact on financial position, liquidity, or capital resources[82] Warranty Obligations (in thousands) | Item | August 2, 2025 | | :---------------------------------------------------------------------- | :------------- | | Balance as of April 26, 2025 | $35,830 | | Warranties issued during the period | $4,287 | | Settlements made during the period | $(2,726) | | Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations | $(1,128) | | Balance as of August 2, 2025 | $36,263 | - As of August 2, 2025, the Company had $57.8 million of bonded work outstanding and $2.5 million in letters of credit outstanding[85] Note 9. Income Taxes This note details the Company's income tax provision and effective tax rate. For the three months ended August 2, 2025, the effective tax rate was 25.9%, primarily influenced by permanent tax adjustments and valuation allowances. The note also mentions the enactment of the One Big Beautiful Bill Act (OBBBA) and its potential future impact - The effective tax rate for the three months ended August 2, 2025, was 25.9%, primarily driven by permanent tax adjustments and valuation allowances[88] - As of August 2, 2025, the Company had $557 thousand of unrecognized tax benefits[89] - The recently enacted One Big Beautiful Bill Act (OBBBA) is being evaluated for its future tax and financial statement effects, with no material impacts as of August 2, 2025[90] Note 10. Fair Value Measurement This note presents the Company's financial assets and liabilities measured at fair value on a recurring basis, classified by level within the fair value hierarchy. As of August 2, 2025, all fair value measurements were categorized as Level 1, primarily consisting of cash and cash equivalents Fair Value Measurements (in thousands) | Item | Level 1 | Level 2 | Level 3 | Total | | :------------------------ | :--------- | :------ | :------ | :--------- | | Balance as of August 2, 2025 | | Cash and cash equivalents | $136,856 | $— | $— | $136,856 | | Total | $136,856 | $— | $— | $136,856 | | Balance as of April 26, 2025 | | Cash and cash equivalents | $127,507 | $— | $— | $127,507 | | Total | $127,507 | $— | $— | $127,507 | - There were no transfers between levels of the fair value hierarchy during the periods presented[92] Note 11. Share Repurchase Program This note describes the Company's share repurchase program, which has been increased multiple times, most recently to $60,000 thousand. During the three months ended August 2, 2025, the Company repurchased 648 thousand shares for $10,652 thousand, with $9,229 thousand remaining authorized - The Board of Directors increased the share repurchase program limit by $10.0 million to $60.0 million on June 23, 2025[94] - During the three months ended August 2, 2025, the Company repurchased 648 thousand shares of common stock at a total cost of $10.7 million[96] - As of August 2, 2025, $9.2 million of the authorized amount remained available for repurchase[96] Note 12. Related Party Transactions This note outlines the Company's policy for related person transactions and discloses specific transactions. It details the historical relationship with Alta Fox Opportunities regarding the Convertible Note and notes that Alta Fox is no longer considered a Related Person. It also identifies Reece A. Kurtenbach, Interim CEO of XDC and a Board member, as a Related Person due to his role and family relationships, and discloses transactions with Milwaukee Bucks Inc., where a Board member serves as President - Alta Fox Opportunities, previously a 'Related Person' due to its ownership of 9.99% of common stock and the Convertible Note, is no longer considered a Related Person as of May 29, 2025, with 9.90% beneficial ownership[100][101] - Reece A. Kurtenbach, a Board member and former President/CEO, is considered a Related Person due to his appointment as Interim CEO of XDC (16.4% owned by Daktronics) and his family relationships with other executive officers[102] - The Company entered into arm's-length transactions with Milwaukee Bucks Inc. totaling $897 thousand, where Board member Peter Feigin is President[103] Note 13. Subsequent Events This note discloses significant events occurring after the reporting period. It includes the approval of the Daktronics, Inc. 2025 Stock Incentive Plan by stockholders on September 3, 2025, authorizing 3,562 thousand shares. It also details the Fifth Amendment to the Credit Agreement, effective December 1, 2024, which permits up to $50,000 thousand in share repurchases from December 2024 through December 2025 and excludes them from certain covenant calculations - The 2025 Stock Incentive Plan was approved on September 3, 2025, authorizing 3,562 thousand shares of common stock for issuance[105][106] - The Fifth Amendment to the Credit Agreement, effective December 1, 2024, permits share repurchases up to $50.0 million between December 2024 and December 2025, and excludes these from the Fixed Charge Coverage Ratio calculation[107][191] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition, results of operations, and liquidity for the three months ended August 2, 2025, compared to July 27, 2024. It includes an overview of the business, known trends and uncertainties, a detailed comparison of consolidated and segment performance, and an analysis of liquidity and capital resources. The discussion highlights the impact of a 14-week quarter versus a 13-week quarter in the prior year Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to uncertainties and factors that could cause actual results to differ materially, including economic conditions, market changes, contract timing, margins, new products, weather, regulation, tariffs, and trade wars[110] Non-GAAP Measures This section defines and explains the use of non-GAAP financial measures, such as contribution margin, for evaluating performance - Contribution margin, a non-GAAP measure, is defined as gross profit less selling expenses and is used by management to evaluate segment profitability and resource allocation[115] Overview This section provides a general description of the company's business, its market position, and operational scope - Daktronics is a leader in electronic scoreboards, programmable display systems, and large-screen video displays for sporting, commercial, and transportation markets[118] - The Company's operations span marketing, sales, engineering, product design, manufacturing, technical contracting, professional services, and customer support[120] - The first quarter of fiscal 2026 included 14 weeks of operations, compared to 13 weeks in the first quarter of fiscal 2025[121] Known Trends and Uncertainties This section discusses significant trends and uncertainties, including business transformation, tariffs, and technological advancements, that may impact future results - The Company is undergoing a business transformation program aimed at sales growth, margin expansion, and top-quartile return on invested capital, with projected spending of $8.0 million to $10.0 million for transformation initiatives in fiscal 2026[122][126] - New U.S. import tariffs on electronic components, aluminum, and steel, effective August 1, 2025, are expected to increase input costs, leading to active adjustments in pricing and sourcing strategies[123] - Global investments in manufacturing capacity and advancements in display and control technologies, including micro-LED and AI-enhanced software, are influencing product development and sourcing priorities[124] - Long-term growth is expected to be driven by increased adoption of LED display systems and the development of new technologies, services, and sales channels[128] RESULTS OF OPERATIONS This section analyzes the company's financial performance, including sales, gross profit, operating expenses, and net income, for the reporting period Product Order Backlog This section details the company's product order backlog and expectations for its fulfillment over the coming periods - Product order backlog increased to $360.3 million as of August 2, 2025, from $267.2 million as of July 27, 2024, and $341.6 million as of April 26, 2025, reflecting higher order bookings[132] - The Company expects to fulfill the backlog within the next 24 months, though timing may be affected by project delays[133] Consolidated Performance Summary This section provides a high-level overview of the company's overall financial performance, including key metrics like net sales, gross profit, and net income Consolidated Performance Summary (in thousands, except per share data) | Metric | August 2, 2025 | % of Net Sales | July 27, 2024 | % of Net Sales | Dollar Change | Percent Change | | :-------------------------- | :------------- | :------------- | :------------ | :------------- | :------------ | :------------- | | Net sales | $218,972 | 100.0% | $226,088 | 100.0% | $(7,116) | (3.1)% | | Cost of sales | $153,900 | 70.3% | $166,390 | 73.6% | $(12,490) | (7.5)% | | Gross profit | $65,072 | 29.7% | $59,698 | 26.4% | $5,374 | 9.0% | | Operating expenses | $41,800 | 19.1% | $36,982 | 16.4% | $4,818 | 13.0% | | Operating income | $23,272 | 10.6% | $22,716 | 10.0% | $556 | 2.4% | | Income before income taxes | $22,223 | 10.1% | $220 | 0.1% | $22,003 | 10001.4% | | Net income (loss) | $16,470 | 7.5% | $(4,946) | (2.2)% | $21,416 | (433.0)% | | Diluted earnings per share | $0.33 | | $(0.11) | | $0.44 | (400.0)% | | Orders | $238,543 | | $176,170 | | $62,373 | 35.4% | - Net sales decreased by 3.1% due to lower volumes in Live Events and Transportation, partially offset by growth in Commercial, High School Park and Recreation, and International segments[136] - Gross profit as a percentage of net sales increased to 29.7% from 26.4% in the prior year, driven by strategic pricing, operational efficiencies, and favorable project mix[139] - Order volume increased by 35.4%, primarily from Live Events (large MLB stadiums and NHL arena bookings), High School Park and Recreation (record quarter for video adoption), and International (Middle East and Australia)[137][138] - Net income significantly improved to $16.5 million from a net loss of ($4.9 million), largely due to the absence of a $21.6 million change in fair value of the Convertible Note[134][145] Reportable Segment Performance Summary This section analyzes the financial performance of each of the company's operating segments, detailing sales and gross profit changes Segment Net Sales and Gross Profit Change (YoY, in thousands) | Segment | Net Sales Change | Net Sales % Change | Gross Profit Change | Gross Profit % Change | | :---------------------------- | :--------------- | :----------------- | :------------------ | :-------------------- | | Commercial | $11,968 | 35.0% | $6,055 | 79.7% | | Live Events | $(28,808) | (26.5)% | $(5,842) | (22.4)% | | High School Park and Recreation | $11,341 | 23.6% | $4,625 | 26.7% | | Transportation | $(5,915) | (26.3)% | $(2,593) | (33.5)% | | International | $4,298 | 33.6% | $3,129 | 309.8% | - Commercial segment net sales increased by 35.0% due to digital billboards and Spectacular LED video display projects, with gross profit percentage increasing due to higher-margin product mix[151] - Live Events net sales decreased by 26.5% due to the absence of a large project fulfillment from the prior year and timing differences in backlog fulfillment, leading to a decline in gross profit percentage[152] - High School Park and Recreation sales increased by 23.6% driven by stronger demand for video display systems, with gross profit percentage improving due to cost-effective video offerings and price increases[153] - International net sales increased by 33.6% due to higher backlog and orders, including a large stadium project in the Middle East, resulting in a significant increase in gross profit percentage[155] LIQUIDITY AND CAPITAL RESOURCES This section assesses the company's ability to generate and manage cash, including operating, investing, and financing activities, and its overall financial flexibility Net cash provided by (used in) operating activities This section details cash flows generated or used by the company's primary business operations, reflecting profitability and working capital management - Net cash provided by operating activities increased to $26.1 million in fiscal 2026 from $19.5 million in fiscal 2025, driven by improved business profitability and a favorable shift in operating assets and liabilities[156] Changes in Net Operating Assets and Liabilities (in thousands) | Item | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :---------------------------------------- | :-------------------------------- | :------------------------------- | | Accounts receivable | $(32,055) | $(15,076) | | Inventories | $(3,512) | $3,153 | | Accounts payable | $25,839 | $5,336 | | Contract liabilities | $14,417 | $7,304 | | Net change in operating assets and liabilities | $1,688 | $(3,765) | Net cash used in investing activities This section outlines cash flows related to the acquisition and disposal of long-term assets and investments in affiliates - Net cash used in investing activities was $5.6 million, primarily for purchases of property and equipment ($4.3 million) and net loans to affiliates ($1.5 million)[157] Net cash (used in) provided by financing activities This section reports cash flows from debt, equity transactions, and share repurchases, impacting the company's capital structure - Financing activities resulted in a net cash outflow of $11.1 million, mainly due to $10.7 million in share repurchases and $0.5 million in debt payments[158] Debt and Cash This section summarizes the company's cash position, debt levels, and compliance with financing agreements and covenants - As of August 2, 2025, the Company had $136.9 million in cash and cash equivalents and $41.5 million of borrowing capacity on its ABL facility (with no outstanding borrowings)[161][162] - The Company was in compliance with all debt covenants as of August 2, 2025, and expects to remain so for at least the next 12 months[163] Working Capital This section analyzes the company's short-term liquidity, focusing on current assets and liabilities and their changes - Working capital increased by $12.4 million to $221.8 million as of August 2, 2025, from $209.4 million as of April 26, 2025[164] - This increase was primarily influenced by a $31.5 million increase in accounts receivable and an $18.3 million increase in accounts payable[164] Other Liquidity and Capital Uses This section discusses the company's capital allocation strategy, planned capital expenditures, and available bonding lines - The Company's capital allocation strategy prioritizes funding operations and growth, maintaining liquidity, reducing debt, and returning cash to stockholders[167] - Projected capital expenditures for fiscal 2026 are approximately $20.7 million, supporting manufacturing equipment, production capacity, automation, and information infrastructure upgrades[168] - The Company has a $190.0 million bonding line available for display installations, with $57.8 million of bonded work outstanding as of August 2, 2025[170][171] Contractual Obligations and Commercial Commitments This section addresses the company's future payment obligations and off-balance sheet arrangements - There were no material changes in contractual obligations during the first three months of fiscal 2026[172] Significant Accounting Policies and Estimates This section confirms no material changes to the company's key accounting policies and estimates during the reporting period - No material changes to significant accounting policies and critical accounting estimates were identified during the first three months of fiscal 2026[173] New Accounting Pronouncements This section refers to disclosures regarding recently issued accounting standards and their potential impact on the financial statements - Refer to Note 1. Basis of Presentation for a summary of recently issued accounting pronouncements and their effects[174] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that there have been no material changes in the Company's exposure to interest rate, foreign currency, and commodity risks since the last annual report - No material changes in exposure to interest rate, foreign currency, and commodity risks were identified during the first three months of fiscal 2026[175] Item 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter ended August 2, 2025 - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of August 2, 2025[176] - No material changes in internal control over financial reporting occurred during the quarter ended August 2, 2025[178] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures not included in the financial statements Item 1. LEGAL PROCEEDINGS This section reiterates that the Company is involved in various legal actions in the ordinary course of business, but management does not believe their ultimate outcome will have a material adverse effect on its financial condition or results of operations - Management believes that the disposition of current legal proceedings will not have a material adverse effect on the Company's financial condition or results of operations[179] Item 1A. RISK FACTORS This section states that there have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K - No material changes from the risk factors disclosed in Item 1A. of Part I of the Form 10-K were identified[180] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details the Company's share repurchase program, which has been increased to $60.0 million. During the quarter, the Company repurchased 0.6 million shares for $10.7 million, with $9.2 million remaining available under the program - The Board approved an additional $10.0 million increase to the share repurchase program, raising the total authorized amount to $60.0 million[181] - During the three months ended August 2, 2025, the Company repurchased 648,190 shares of common stock at an average price of $16.43 per share, totaling $10.7 million[183][185] - As of August 2, 2025, $9.2 million remained available for repurchase under the program[183][185] Item 3. DEFAULTS UPON SENIOR SECURITIES This section indicates that there were no defaults upon senior securities during the reporting period Item 4. MINE SAFETY DISCLOSURES This section indicates that there are no mine safety disclosures applicable to the company Item 5. OTHER INFORMATION This section discloses that no directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter. It also provides further details on the Fifth Amendment to the Credit Agreement, which permits specific share repurchases and excludes them from certain covenant calculations - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the three months ended August 2, 2025[190] - The Fifth Amendment to the Credit Agreement, effective December 1, 2024, permits the Company to make share repurchases up to $50.0 million between December 2024 and December 2025, and excludes these from the Fixed Charge Coverage Ratio calculation[191] Item 6. EXHIBITS This section provides an index to the exhibits filed as part of this Quarterly Report on Form 10-Q, including various agreements, certifications, and XBRL documents - The exhibits include amendments to the Credit Agreement (Consent and Amendment No. 4 and No. 5), the 2025 Stock Incentive Plan, and certifications from the CEO and CFO[193]